Cryptocurrency markets go down as inflation worries take over
Due to the recent decline in prices, the crypto markets have turned red once more. Given that many experts are beginning to question whether inflation has peaked, the slow price rise could signal the beginning of another bearish phase.
Bitcoin prices have once more dipped under $23K after reaching a high of $24.5K during trading. The price is currently $22.8K. Also falling from $1,764 earlier in the week to as low as $1,570 was Ethereum. After a brief rally, it is now trading at $1,622.
The assumption that cryptocurrencies, like Bitcoin, are more resistant to inflation than fiat currencies like the U.S. dollar has made them tempting to investors. From being practically worthless in 2010 to more than $20,000 in late 2020, the value of bitcoin has generally climbed far more quickly than the value of the US currency. Bitcoin has experienced significant surges and drops due to the market’s volatility, but the trend line over time has been upward. As a result, Bitcoin is becoming a more often used hedge against inflation of fiat currencies.
The fundamental feature of Bitcoin that prevents inflation is that it has a known and restricted supply, and that production of new bitcoins will gradually and predictably decline over time. The price of cryptocurrencies might be severely impacted by rising inflation. Through interest rate increases and quantitative tightening, the Federal Reserve controls inflation. The Fed raised the rate by 75 basis points in June, which caused a crypto bloodbath.
The Crypto Market
However, the crypto market did not experience much of a decline when the July CPI statistics indicated rapidly rising inflation. Some experts claim that the market has already factored in yet another disappointing CPI report and ensuing interest rate increase. It was anticipated that the CPI data would increase from August and the Fed would change its policy.
A new set of poor CPI numbers and an exceptionally hefty Fed rate hike might send the cryptocurrency market back into a bear market. Cronos and Ethereum Classic are experiencing significant losses too. The key question is still whether BTC could outperform conventional investments and fiat money. According to many commentators, the maturing bitcoin and cryptocurrency markets have given way to declining ROIs over time.
Not every cryptocurrency is made like Bitcoin. For instance, a helpful, low-volatility place to save some money may be the stablecoins category of digital currency. They are becoming more and more popular. Many stablecoins are pegged to fiat currencies like the dollar. However, if a stablecoin is tied to a fiat currency, inflation may affect your investment and it may depreciate over time as their reserve currency does.
According to conventional thinking, the price of bitcoin will increase during uncertain times. This is just like the price of gold and other valuable commodities. This wasn’t always the case. for instance, it plunged precipitously at the start of the pandemic. it’s also a lot more practical than using gold as a medium for storing and transferring value. This is because you are able to use it via the internet.
